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NEOLIBERALISM OR REGULATORY CAPITALISM John Braithwaite

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NEOLIBERALISM OR REGULATORY CAPITALISM John Braithwaite NEOLIBERALISM OR REGULATORY CAPITALISM John Braithwaite Occasional Paper 5 October 2005 NEOLIBERALISM OR REGULATORY CAPITALISM John Braithwaite Regulatory Institutions Network Research School of Social Sciences Australian National University Canberra ACT 0200 ISBN 0-9756819-5-8 (online) RegNet Occasional Paper No 5 October 2005 © Regulatory Institutions Network, Research School of Social Sciences, Australian National University 2005 National Library of Australia Cataloguing-in-Publication data: Braithwaite, John, 1951- . Neoliberalism or regulatory capitalism ISBN 0-9756819-5-8 (online) 1. CaPitalism. 2. Neoliberalism. 3. Globalisation. I. Australian National University. Regulatory Institutions Network. II. Title. (Series : RegNet occasional paper ; no. 5). 330.122 Disclaimer This article has been written as part of a series of publications issued from the Regulatory Institutions Network. The views contained in this article are representative of the author only and not of the Australian National University or any funding partner. ii REGNET OCCASIONAL PAPERS This series of occasional papers is designed to bring the research of the Regulatory Institutions Network to as wide an audience as possible and to promote discussion among researchers, academics and practitioners both nationally and internationally on regulation. The peer-reviewed occasional papers are selected with three criteria in mind: (1) to share knowledge, experience and preliminary findings from research projects; (2) to provide an outlet for policy focused research and discussion PaPers; and (3) to give ready access to previews of paPers destined for publication in academic journals, edited collections, or research monographs. iii Abstract Jacint Jordana and David Levi-Faur have provided systematic evidence that, since 1980, states have become rather more preoccuPied with steering and less with rowing. Yet non-state regulation has grown even more rapidly, so it is not best to conceive of the era in which we live as one of the Regulatory State, but of Regulatory Capitalism. It is argued that Regulatory Capitalism is not about neoliberalism, indeed that those who think we are in an era of neoliberalism are mistaken. The corporatisation of the world is conceived as a product of regulation and the key driver of regulatory growth, indeed of state growth more generally. The reciprocal relationship between corporatisation and regulation creates a world in which there is more governance of all kinds. iv Neoliberalism or Regulatory Capitalism? John Braithwaite1 Regulation and Governance States can be thought of as providing, distributing and regulating2. They bake cakes, slice them, and proffer pieces as inducements to steer events. Regulation is conceived as that large subset of governance that is about steering the flow of events, as opposed to providing and distributing.3 Of course when regulators regulate, they often steer the providing and distributing that regulated actors supply. Governance is a wider set of control activities than government. Students of the state noticed that government has shifted from “government of a unitary state to governance in and by networks” (Bevir and Rhodes 2001, 1; Rhodes 1997). But because the informal authority of networks in civil society not only supplements but also supplants the formal authority of government, Bevir, Rhodes and others in the networked governance tradition (notably Castells 1996) see it as important to study networked governance for its own sake, rather than as simply a supplement to government. This essay proceeds from the assumption that there has been a rise of networked governance, without considering the analyses of the likes of Castells, Rhodes and Bevir as to why this might have occurred. We build on Jacint Jordana and David Levi-Faur’s (2003, 2004) systematic evidence that, since 1980, states have become rather more preoccupied with the 1 My thanks to Rod Rhodes, Peter Grabosky, Jennifer Woods, Susanne Karstedt, Adam Crawford, Clifford Shearing, Christine Parker and Peter Drahos for helpful comments on drafts of this essay. 2 Sen (1992), Nussbaum (1995) and March and Olsen (1995, 91-139) argue that developing capabilities is a central and distinctive role of the state. While I agree, I am happy to conceive this as a particularly strategic kind of provision, as by developing capabilities through state provision of education, training, science funding and opportunities for political deliberation, among other public goods. 3 There is merit in Julia Black’s (2002) view that for some analytic purposes narrower conceptualizations of regulation as steering through state rules or law can have more use, while for others broader conceptualizations that do not require the purposiveness of steering, that allow in Foucauldian governmentalities for example, can have more analytic use. 1 regulation part of governance and less with providing4. Yet non-state regulation has grown even more rapidly, so it is not best to conceive of the era in which we live as one of the Regulatory State, but of Regulatory Capitalism (Levi-Faur 2005). The first section of the essay argues that Regulatory Capitalism is not about neoliberalism, indeed that those who think we are in an era of neoliberalism are mistaken. The historical forces that have produced Regulatory Capitalism are then sketched as a Police Economy that evolved from various Feudal economies, the supplanting of police with an Unregulable 19th Century Liberal Economy, then the State Provider Economy (rather than the “welfare state”) that gives way to Regulatory Capitalism. In the era of Regulatory Capitalism, more of the governance that shapes the daily lives of most citizens is corporate governance than state governance. The corporatisation of the world is both a product of regulation and the key driver of regulatory growth, indeed of state growth more generally. The big conclusion of the essay is that the reciProcal relationship between corporatisation and regulation creates a world in which there is more governance of all kinds. 1984 did arrive. The interesting normative question then becomes whether this growth in hybrid governance contracts freedom, or exPands positive liberty through an architecture of separated powers that check and balance state and corporate dominations. While the essay sets uP this quandary of our time, it does not answer it. The Neoliberal Fairytale A widely believed chronology, on the left and the right, is that from the end of the 1970s neoliberalism conquered the world (Chomsky 1999). “What is neoliberalism? A programme for destroying collective structures which may impede the pure market logic” (Bourdieu 1998, 2). In the Foucauldian 4 They may have become less preoccupied with distributing as well, but here there is not so clear a body of empirical evidence on trends, so this is not an issue addressed in this essay. 2 tradation, the methodological prescription is to study neoliberalism as a program rather than as a reality. Of course it is possible, indeed likely, that neoliberalism as a program has all sorts of real, unintended effects on the world without actually creating a neoliberal world. My interest in this section, however, is limited to whether neoliberalism has become an institutional reality. Institutionally, neoliberalism means privatisation, deregulation, including a deregulated international trade regime, and a diminished public sphere. During the 1970s, according to one conventional chronology, the Keynesian welfare state that we had known since the New Deal died. Hayek, a scorned intellectual for most of his life, replaced Keynes as the ascendant inspiration of political economy (Peters 1999). Not only had Keynes been sidelined, the dominant intellectual alternative to him in the academy – Marx – was also about to wither away. The fairytale continues that decisive political moments for this tumultuous change in the world of ideas were the election of Margaret Thatcher in the UK in 1979 and Ronald Reagan in the US in 1980. The Hayekian prescriptions of these leaders were for small government, privatisation and deregulation. The revolution quickly seemed complete when Labor governments in Australia and New Zealand in the early 1980s bought in to policies of privatisation and deregulation. Indeed New Zealand took these to greater heights than seen in Thatcher’s Britain, just as Ireland later took her low corporate tax policies to deeper lows. The lessons of Labor in the Antipodes were not lost at the Metropoles. It was necessary for Blair and Clinton to be New Labour, New Democrats, not “tax and spend” social democrats. The leadership was English speaking; it was not until the late 1990s that the German social democrats seized power after they learnt to be “New”. The “Chicago boys”5 were sending missionaries to places like Latin America as well. The leadership of the likes of Carlos Menem in Argentina was lionized by 5 Hayek moved to the University of Chicago in 1950, where he joined his influential disciple, Milton Friedman. 3 the IMF as demonstrating the neoliberal path out of underdevelopment. Short- lived improvements in the performance of countries such as Argentina and New Zealand, which had been the developed economies that had performed worst during the Provider State era, were not interpreted by neoliberal missionaries as regression to the mean, but as fundamentally effective transformations. When they started performing worse than more regulated economies, the IMF, oblivious, continued to tout their virtues. Some
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